The Federal Reserve is meeting this week and will announce at 2:15 PM Wednesday their decision on interest rates—there is little chance that the Fed will make any change. More importantly, investors will be looking for some signs from the Fed Chairman, Ben Bernanke, about the Fed’s intention to take action to stimulate the economy further. This has very important implications for all markets, not just the stock market, because the introduction of fresh cash into the economy can have positive short-term effects
The Dorsey Wright & Associates (DWA) current technical analysis shows US stocks and Bonds as the two strongest major asset classes followed by Currencies, International stocks, and Commodities. Within the US stock asset class, Middle capitalization stocks are favored, growth is favored over value, and equal-weighted indexes are favored over capitalization-weighted indexes. On a relative strength basis, Real Estate, Consumer Discretionary, and Health Care are the strongest major economic sectors. Energy, Telecom, and Materials are the weakest. Within the Bond asset category, US Treasuries and International bonds are favored.
The New York Stock Exchange Bullish Percent (NYSEBP) closed at 53.32 falling from 54.21 the previous week. This is the first drop in seven weeks and I will watch closely to see if this move is marking a peak in this current move of the NYSEBP or just a brief pause. Municipal bonds remain very overbought indicating that prices have gotten very expensive in relation to prices over the past ten weeks. I would not initiate new positions here.